Pre-Constructed Condo: To Buy or Not To Buy?

Although purchasing a pre-constructed condominium unit can be advantageous at some points, especially with Bangkok Condos, there are things that you need to understand before you go down that path.

First off, buying a pre-constructed condominium can sometimes be like gambling. You release money on a small scale, hoping for the jackpot and bingo, you’re a hundred dollars richer. But things don’t always go that way. As with gambling, there’s a bigger possibility that you will lose the game than the chances of you winning.

There are various payment schedules in buying a Bangkok condo, but there always is a substantial part of the purchase price to be paid the developer. This should be made prior to the completion of the condo and before ownership is transferred. The following is a usual schedule for sale and purchase payments:

  • a reservation agreement (if any) with a 100,000 baht (approximately 3300 USD) reservation fee
  • a 10-20% deposit of the total condominium price on the condominium sale and purchase agreement’s execution date
  • payment via monthly installments during the construction of the condominium, and the final amount paid upon the completion and transfer of ownership of the condominium

Developers of pre-constructed condominiums have the biggest advantage in this setup. Since the condominium is still on its way to completion, a third party escrow is not necessary. An escrow, defined by the 2008 Escrow Act or new 2008 Condominium Act, protects buyers from tricksters cum developers that drain the money of investors down the sink. The neutrality and safety of the money deposited by the buyer is in the safe-keeping of a SET listed escrow. This way, the buyer is safe, knowing that the deposit is in good hands.

So where do you deposit the money? Directly to the developer. In fact, in Thailand, it is very uncommon at all for property developers to offer escrow arrangements. But, they are allowed to require installments straight into their bank account. And, take note, they can do this without offering any guarantee or security for such payments, except of course the contractual obligations under the sale and purchase contract.

For these reasons, there is a risk that the buyer’s money will all be flushed down the toilet. How? When the developer faces default or bankruptcy. What’s more daunting is that the developer has a much stronger stand in this.  Let’s say that the developer did not deliver as promised. Since the given circumstance, the buyer will not make the final payments. The developer could say that the buyer defaults by not paying the final payment, noting that he is permitted to relinquish any payment that the buyer had made, and sell the unit to another person. This action cannot be done if a third party escrow is present.

Of course, these risks can be minimized, or simply put to past, if the developer you’re dealing with is a trusted one. Remember that in everything, there is a risk, but it can be prevented if you will act smart and be skeptical about things your instincts, and lawyer, think you shouldn’t do.

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